In Deep Harbor Condominium Assn v Sanford, an unpublished Michigan Court of Appeals opinion, the condominium association and several co-owners sued attempting to void a settlement agreement executed to resolve earlier litigation. The settlement agreement provided that certain unit owners were “released and forgiven from paying any assessments levied against their units until the units were conveyed or leased.
In the second case, the court held that the association could not collaterally attack the settlement agreement with the unit owners because it did not allege sufficient grounds under MCR 2.612. The court held that the remaining plaintiffs who were not parties to the earlier litigation could attack the settlement agreement, but had not alleged sufficient grounds to do so.
The plaintiffs argued that the settlement agreement modified the percentages of value state in the Master Deed and therefore ran afoul of the MI Condominium Act. The court held that the agreement did no such thing: the association could continue to assess the units in accordance with the percentage of value, but could not collect the assessments until the conditions were fulfilled. The practical effect of the settlement agreement was to leave a severe deficit in the association’s operating budget, but it did not change the assessment levied against the Plaintiffs’ units. The court affirmed the long-held principal that "a court will not interfere with an otherwise lawful contract merely because the agreement later proves to be imprudent.”
However, the court held that the plaintiffs had sufficiently pled a cause of action against former board members that by entering into the settlement agreement, they had engaged in “illegal, willfully unfair and oppressive acts” in violation of MCL 450.2489, which may authorize the court to set aside the settlement agreement. The case was remanded to the trial court to consider this claim.